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A Steal at $39 Billion

August 19th, 2010 No comments

link Potash Corp. CEO: Takeover bid, at $39B US, ‘grossly inadequate’.

Really? Are you kidding me?  I suppose you have to at least play the part of insulted manager if only to pursue a higher bid for the company for which you were unable to realize proper  shareholder value.  In his private moments though, he must be doing somersaults like a Russian gymnast.  Why? Because from some accounts, CEO Bill Doyle will make over $445 million dollars from stock options if the takeover bid for Potash Corporation succeeds. 

If the takeover bid from BHP Billiton is grossly undervalued, what does that say about the affairs of Potash Corp under the stewardship of the present management?  If you ran a lemonade stand for a group of people and then all of a sudden someone wants to pay a huge premium over estimated value to buy it and also to pay you a personal windfall, you’d take the money and there would be a vapour trail to your new villa in France. 

If Mr. Doyle thinks the offer is grossly undervalued, why isn’t the market price reflective of his perception before the takeover bid?  Investing is all about perception.  There’s the old saying that a market is a place where there is an agreement on price but a disagreement on value.  In this case, BHP sees something the present Potash shareholders do not.  Someone’s right, that’s the game.

Rules Are Rules

August 16th, 2010 2 comments

link Weep for Johnson if you must, but rules are rules – Golf, PGA Tour – CBSSports.com PGA.

The cruelest of all sports.  Once again, Dustin Johnson’s unfortunate end at this year’s PGA golf championship underlines the love/hate emotions that enslave all participants to the game.  Golf as an allegory to life has been written about dozens of times over the years I’m sure.  There is no sport that requires as much acuity of mind as well as dexterity of skill as golf.   But what truly sets this sport apart from all others is the underlying fairness of the rules and the honorable observance of the rules by all participants.  

Each player is expected to abide by a specific set of rules for play and conduct and any transgressions are met with the appropriate penalty, from loss of strokes, loss of hole, or loss of match.   As trivial as this sounds to non golfers, the very rigidity of the rules of golf is precisely the charm and draw of the sport.  Far from elitist, golf extolls the most egalitarian rules structure.  There are no preferential rules.  As in Johnson’s case, the rules apply whether you are leading and in contention or not.  They apply to the top name players as well as to more journeymen players.  Golfers may recall years ago that golfer Craig Stadler was penalized strokes for placing a towel under his knees when he had to bend down to make a shot from under a tree.  It was ruled that he was ‘building his stance”.  As well, there was the incident when Paul Azinger, standing in some water just off the fairway, moved a pebble that was under his shoe in order to get a firm stance.  A viewer actually called in that infraction and he was penalized.

Some of the most painful and heartbreaking decisions were made upon golfers doing the most mundane thing, turning in their scorecards AFTER the round was completed.  It happened to Michelle Wie recently, but the most painful was in 1968 during the Master’s Tournament.  From AboutGolf.com:

“…In 1968, Aaron was the playing partner of Roberto De Vicenzoin the final round. De Vicenzo should have gone into a playoff with Bob Goalby, but Aaron wrote down an incorrect score on De Vicenzo’s scorecard and De Vicenzo failed to catch the mistake. When De Vicenzo signed and turned in the incorrect score, he was penalized and dropped out of the playoff, giving Goalby the win…”

In golf, rules are rules and the inflexibility of such rules has contributed mightily to the integrity of the game and to the records and achievements of generations of players.  Essentially, the rules state that the player and no one else, is responsible for his outcome.  They  could not blame their results on the weather, on other players, on bad luck, on society, on bad upbringing or ignorance.  No amount of whining or lobbying would change the outcome if unfavorable.  The player alone determines his own fate.  What happens during the round as far as bad bounces or bad lies were considered “the rub of the green” and no quarter was given by other contestants for this reality.  There is no “should be” in golf.  In fact, if a player knowingly impinges upon the rules, he is obliged to call an infraction upon himself, whether anyone else notices or not.  It is after all, a gentleman’s pursuit. 

If only this kind of decorum occured in the real world.  As if.